Who’s ready for a rebate?

Millions in excess power payments yet to return to customers

Published on April 29, 2014

It won’t come this month, or likely even this year, but a refund potentially worth hundreds of dollars per household is on the way for power customers in Newfoundland and Labrador.

The trouble is determining who gets the rebate and how much is given in each case.

Arguments to both points have been ongoing since 2009 before the Board of Commissioners of Public Utilities (PUB) and in the courts.

All the while, the total amount of money to be returned to power customers has continued to grow, standing at $161.6 million as of last record, in August 2013.

The pot of money is better known as the Rate Stabilization Plan (RSP) surplus — a result of cost savings at Newfoundland and Labrador Hydro, coming from cuts to the pulp and paper industry, combined with the use of a larger percentage of hydro power in meeting overall customer needs.

Generating power through hydro plants costs less than using power derived from Bunker C burning at the Holyrood plant. When power rates are set, certain assumptions are made as to how much fuel will need to be burned at Holyrood to meet that need.

Less demand for power, oil power in particular, saves money.

As of 2008, according to information available through the PUB, there was enough saved and funnelled into the surplus account to give the island’s industrial customers — including Corner Brook Pulp and Paper, North Atlantic Refining and Teck Resources — free power for a year.

The industrial customers were expected to receive the full benefit of the surplus, under standing PUB rules awarding the money to customer segments with the biggest drop in demand.

Yet objections were raised by Newfoundland and Labrador Hydro, Newfoundland Power and the Consumer Advocate.

“It would have ended up in a huge winfall going to industrial customers at the expense of other customers who had overpaid,” said Consumer Advocate Tom Johnson, in an interview Monday.

In 2009, the real back and forth began, as Hydro applied to the PUB to have consideration given to more than big industry. The decision went the other way, but was challenged in Supreme Court of Newfoundland and Labrador Court of Appeal by Hydro and the Consumer Advocate, with a result in 2012 in favour of a return for Joe Ratepayer.

In 2013, two provincial government orders directed the surplus be given out to individual homeowners and business owners, after $49 million was set aside for the industrial customers. The province called on Hydro to develop a proposal on how to give out the money.

The PUB received Hydro’s plan, but decided against it. In an order issued earlier this month, the regulator said the money will be split amongst all ratepayers — including ratepayers in Labrador.

“That caught us off guard. None of the utilities nor myself saw that as a contemplated outcome. I mean it was not on the radar that customers who had not contributed would be getting moneys, because in our view, certainly my view, was that this was to be a refund. Fundamental to a refund is that the customers who put money in get it back,” Johnson said.

The Consumer Advocate and Hydro have now filed appeals to that PUB order.

“I would have much preferred obviously that we had received a decision from the board that shared the money amongst those who had paid it ... and that we get on with it,” Johnson said. “(But) it’s a matter of fairness I think.”

For its part, Newfoundland Power said it is looking for a final decision on where the millions of dollars will go and “will work with the parties to return the surplus to customers as directed,” said Karen McCarthy, Newfoundland Power’s manager of corporate affairs and communications, in an email response to questions.

She stated Hydro and the PUB, rather than Newfoundland Power, were in a better position to speak to when the money might be paid out and how much might ultimately go to individual customers.

In addition to the appeal to the court, the Canada Revenue Agency (CRA) is looking at tax considerations, suggesting some return of HST might also be added.

“The amount to be provided to customers will depend upon both who is eventually determined to be eligible for refund and the manner of disposition that has not yet been approved by the PUB,” stated a response to questions on the fund from Hydro.

Ongoing legal costs are not being taken from the fund.

And changes are now on the table to alter how Hydro’s needs are estimated, making the return yet to come to customers a one-time benefit.